Dual Display on Acer Aspire 3003WLCi

I've got the dual display working, but have one small problem, when in
dual mode (external montitor connected) the LCD can no longer support
the resolution and the screen goes virtual (not sure what the right
term is). The same setting work fine (no virtual area) when there is
no external monitor connected. Here is the current configurations on
the SIS M760GX:

A)Stand alone (no external monitor connected)
LCD - 1280x800 - 32bit - 60Hz

B)Dual mode
LCD - 1280x800 - 32bit - 60Hz
Monitor - 1280x1024 - 32bit - 60Hz

In mode "A", everything fits on the laptop screen. I can see all of
the screen on the LCD.

In Mode "B", the LCD can not contain the resolution it is set to (not
sure if it's a windows thing or a hardware thing). The entire display
scrolls when the mouse goes near an edge. It still appers to be set
properly resolution wise, because the area I can use, the vertical
(800), is not as big as on the monitor (1024). Can't roll the mouse
from the monitor to the LCD from the very bottom area of the monitor.

Anyone know if this is by design or I'm just doing something wrong?
Would like everything to always fit on the LCD screen, like it does
when no external monitor connected..
Acer support said that both displays need to be set to the same
resolution, but that is obviously not the case either, and doing that
(lowering box), still had same behaviour.
I've tried the above with the Acer Adapter drivers, and the latest ones
I just downloaded from SiS.

Thanks for any insight,
Tony